Many people wonder what outsourcing is. The term has many definitions. Literal translation from English means that it is attracting resources from outside to meet the necessary needs. In practice, this definition is used when placing long-term orders to obtain the required services from third-party enterprises, or transferring some production functions to other companies.
There is some proximity, and in some cases, the compatibility of outsourcing and subcontracting. The first type of activity is based on long-term stable business relations between the contractor and the customer, based on contractual agreements. At the same time, in the interests of the customer, the contractor adapts its production and technological means or the intellectual and technical potential, receiving payment for this, which is determined not by the share of profit, but by the current cost of services. Knowing what outsourcing is, you can see that subcontracting is essentially a special case of this type of activity, implying limited connections in the framework of one-time orders.
The entire outsourcing market can be divided into two segments: the provision of intellectual services and industrial outsourcing. The first type includes IT outsourcing. This work on maintenance of office equipment, information processing, programming, etc. Industrial outsourcing, on the one hand, implies the production of various components, hardware, blanks, and, on the other, the implementation of auxiliary operations and functions to ensure production (warehousing, accounting, maintenance, repair, advertising, cleaning of premises, etc.) are also referred to this type logistic outsourcing.
One of the factors that contribute to the development of these services is the availability of a highly efficient modern communication environment (transport, computerization and communication). This ensures a reliable and fast exchange of information, material and financial flows, together with a high level of specialization of enterprises in the field of services and production.
The most important argument in favor of the development of outsourcing is cost savings, as well as a guarantee of the high quality and reliability of the services provided. This is due to the fact that the contractor usually has a narrow specialization and focuses on the best specialists, uses the most modern equipment, applies advanced technologies, and accumulates service experience while working with various clients.
Knowing what outsourcing is, many companies turn to just such organizations. Indeed, this kind of specialist, serving many customers, optimizes the economy of services and distributes its overhead costs, and this allows you to reduce prices for services and at the same time improve their quality. Given this, customers buy services, while not incurring costs associated with the maintenance of sophisticated equipment and specialized qualified personnel.
Turning to the contractor and knowing what outsourcing is, the customer company can reduce development costs, because it becomes possible to purchase services at the best prices, without incurring additional costs. Having concluded an outsourcing agreement, the customer has the right to receive the necessary services performed at a professional high level, providing himself with guarantees of the material liability of the contractor for the quality of execution. This is possible because the outsourcing company is a legal entity and has certain assets that can be claimed for compensation for damage. In addition, this activity is insured, and the outsourcer shares his responsibility with the insurance company.